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HISPANIC BUSINESS 2001 EOY: Perfecting the Growth Spurt

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Juan Mencia’s Cube Corp. is enjoying breakout success – and planning for more of the same.

The terrorist attacks in New York and Washington, D.C., affect few industries as much as federal service contractors. But Juan “Jack” Mencia, CEO of The Cube Corp., knows how to adapt. His business savvy and entrepreneurial drive have helped him build a $42 million company in just seven years. In recognition of his success, Mr. Mencia has won HISPANIC BUSINESS magazine’s Entrepreneur of the Year 2001 Award.

The Cube Corp. provides facility management services for the federal government – and thus is strongly affected by increased anti-terrorist security measures. The company’s clients include a large NASA base in California, the military, and office buildings inside the Beltway. Cube currently ranks number 105 on the HISPANIC BUSINESS 500. On the basis of existing contracts, the company anticipates more than doubling its annual revenue next year to break the $100 million mark.

That projection may sound high, especially in shaky economic times, but Mr. Mencia has proved skeptics wrong before. In 1994, for example, he parted ways with his former partners to form The Cube Corp. His business trajectory relies on a strategic long-term plan: The company first bids on small subcontracts to establish a relationship with procurement officers; over time the contracts grow larger, until Cube becomes a prime contractor; then it teams with other companies to handle the workload.

“What impressed me most about Cube Corp. is its ability to grow quickly and yet manageably,” says Jose Fourquet, one of this year’s EOY judges and a vice-president for Goldman Sachs. “The company is unquestionably expanding at a rapid rate, but it’s in no danger of growing out control.”

According to Mr. Fourquet, most business startup failures are attributable to run-away growth that complicates cash-flow management and leaves young firms vulnerable in the face of changing market conditions. He says Cube Corp. has thus far demonstrated “quality growth,” which is to say sustainable growth.

“His sales have just been phenomenal, and it’s particularly remarkable given the industry he’s in,” adds Robert Rivera, last year’s EOY winner and a judge in this year’s competition. He too was impressed by Mr. Mencia’s ability to grow quickly while maintaining tight control of Cube’s operations.

“It’s the money you keep, not the money you earn, that’s the measure of a company. Cube Corp has shown itself to be adept on that count,” he says.

Cube posted annual sales growth of 71 percent last year, and its return on equity exceeds 80 percent. Its net worth growth from 1999 to 2000 was nearly 68 percent.

“I view [Cube] as a well-managed, customer-focused company that goes out of its way to promote good employee relations, and I think Jack Mencia has a personal commitment to integrity and fair play that is unsurpassed in our industry,” says Chuck Ervin, chairman of the Contract Services Association of America. “I never hesitate to recommend Cube as a subcontractor.”

Integrity holds special importance in the service industry because companies often team up to win a contract, according to Mr. Ervin. “Today we’re competitors, tomorrow we’re team partners,” he says. “It all depends on the opportunity and the way the competitive landscape lines up. But it’s not a love affair – it’s business.”

Although Mr. Mencia acknowledges he’s taking a chance by creating a top-heavy company in the government sector, The Cube Corp. has expanded its senior staff in anticipation of securing large contracts. “We are prepared today for growth,” he says. “And we’re prepared because we brought in the right people and have the right systems in place.”

Because a service company lives or dies on the skill level of its employees, Cube pays attention to its work force. It has about 1,100 workers across the country, including pipe fitters, electricians, plumbers, carpenters, security guards, janitors, and landscapers. Some employees are subcontractors. About 10 percent of the company’s overall budget goes to employee training, and the company has 21 collective bargaining agreements with unions. Whenever the company assumes a new contract, it recognizes the monetary terms of the existing union contract, then tries to negotiate the non-economic clauses to bring them into compliance with its established practices and management style. Good-faith bargaining also has helped the company avoid strikes. Cube likely faces additional operational costs, however, because the government is tightening the screening process for employees and contractors

Cube competes in a market dominated by large corporations such as Johnson Controls, DynCorp, Raytheon, and Brown & Root. According to Gary Engebretson, executive director at the Contract Services Association of America, only 127 of the 69,000 government service contractors have revenues of more than $150 million. To join that elite group, Cube needs to grow quickly to keep up with the demands of a downsizing, outsourcing federal bureaucracy. “It is a growing industry, and in my judgment it will continue to grow,” comments Mr. Engebretson.

EOY judges rated The Cube Corp. above average or superior for company mission statement, financial performance, identification of competition, solutions to recent business problems, marketing, company benefit package, employee training, and plans for incorporating technology and e-commerce.

Mr. Mencia was exposed early to the concept of money management. He was born in Miami to Cuban exile parents. His mother held a doctorate degree, his father was a lawyer, and his great-great-grandfather, Jose Miguel Gomez, was president of Cuba. In the early 1960s, the Mencia family moved to Falls Church, Virginia, where Mr. Mencia’s father died of lung cancer in 1966. His mother landed a job at the Organization of American States, but the family struggled financially.

After graduating from George Mason University in 1984 with a bachelor’s degree in finance, Mr. Mencia joined American Operations Corp., where he worked as a financial analyst. The operation was sold to Global Associates, a West Coast firm, in 1990. But in early 1992, Mr. Mencia and two of his coworkers bought the company. He says their plan was to do consulting work for businesses seeking contracts for facilities management, while using the company’s profits to bid on its own contracts. Frustrated that his partners did not share his vision for rapid corporate growth, however, Mr. Mencia decided to form his own business in 1994.

Mr. Mencia says that he was bitten by the entrepreneurial bug years earlier, when he tried to establish a small computer services company and failed. “I learned some important lessons from that failure,” he says. The most important lesson was the need for an entrepreneur to maintain controlling ownership.

When Mr. Mencia sought investors for his new company, he found that they wanted too much control. So using his savings, the equity in his house, and a few credit cards, he launched The Cube Corp. from his home in October 1994. Mr. Mencia named his venture after the boyhood nickname of his older brother, Manny, who was called “Cube” – short for “Cuban.”

“I struggled for a long time to find a name that described the business, but I failed miserably at coming up with a name that would roll off the tongue,” Mr. Mencia recently told a newspaper reporter. “So one night, lying in bed, I popped up and said ‘The Cube,’ because that’s what they called my brother in high school. I thought we could develop a Cube logo.”

The Cube Corp. opened its first commercial office in Vienna, Virginia, and before the end of the calendar year had landed $100,000 in consulting contracts. The company finished that year about $2,200 shy of breaking even.

Headquartered today in Sterling, Virginia, Cube has five main service lines: operations and maintenance, logistics and support services, job corps and operations, security services, and engineering and construction services.

Most of the company’s contracts are for maintenance of government facilities, including NASA’s Ames Research Center in California, two facilities for the Department of Agriculture, and a U.S. Border Patrol training facility in South Carolina. Cube also has contracts with the Army and Air Force as well as security-sensitive sites such as the Department of Energy’s operations in Albuquerque.

Mr. Mencia credits his company’s success to his business plan, with its exclusive focus on the business of servicing and maintaining facilities. For most of his competitors, facilities management is not the company’s primary business. “A lot of these companies, when their core business is not doing well, turn to government contracts in the service sector,” notes Mr. Mencia. Cube is different, he says, because “this is what we do. This is our core business.”


Selection of the Entrepreneur of the Year
The Entrepreneur of the Year 2001 was selected from a pool of more than 200 candidates nominated by HISPANIC BUSINESS readers and Hispanic CEOs. An analysis of financial performance for 1999 and 2000 narrowed the pool to 10 finalists. A panel of judges then reviewed the finalists’ application data and scored their responses to questions regarding business performance, management, employee training and development, and involvement in fostering entrepreneurship.

The judging process for Entrepreneur of the Year requires the nominees to submit sensitive company financial data and is therefore strictly confidential. Judges and all those concerned with selection of the Entrepreneur of the Year Award are committed to upholding and maintaining that confidentiality.

This year’s judges were Jose Fourquet, vice-president, Fixed Income, Currency, and Commodities Division, Goldman Sachs & Co., New York; Robert Rivera, CEO of Spectrum Communications Cabling Services in Corona, California, and last year’s EOY winner; and Victoria Quintana, vice-president of TeamExcel in Denver, also a past EOY winner.

As sponsor of the 2001 HISPANIC BUSINESS magazine EOY Award ceremony, Goldman Sachs was a key participant in honoring this year’s winner at the event, held October 3 at the Westin Bonaventure Hotel in Los Angeles.

Goldman Sachs is a leading global investment banking and securities firm, providing a full range of investing, advisory, and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments, and high-net-worth individuals.

Founded in 1869, Goldman Sachs is one of the nation’s oldest and largest investment banking firms. After more than a century as a private partnership, it became a public company in 1999. The Goldman Sachs Group Inc. is headquartered in New York and has more than 20,000 employees throughout its 41 offices in 23 countries around the globe.

Also sponsoring this year’s EOY award ceremony were Ford Motor Co., Fox Sports World Español, US Airways, Philip Morris, and Hispanic Media.

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